Western sanctions against Russia are currently being revamped as part of what appears to be a novel one-two punch from the United States and European Union (EU), with the two intending to continue their offense against Russia. In addition to the recent announcement that the country plans to send $700 million worth of advanced rocket systems and munitions to assist Ukraine with the ongoing conflict, the United States is also implementing a slew of new economic sanctions against the Kremlin. The EU on the other hand is cracking down on those currently seeking to evade existing sanctions, including financial service providers, bankers, legal officials and other professionals who have assisted Russian oligarchs in wake of the crisis. The West hopes that it can force Russia to stand down and leave Ukraine by further crippling their financial system, though many have argued that furthering the fight may have additional negative repercussions on their own respective economies.
The United States government announced last week that they levied sanctions against a total of 34 Russian entities and individuals, further expanding their already lengthy list of targets. In this particular case however, these sanctioned entities are not simply “oligarchs”, but are actively involved in the Russian technology sector, with the move made to limit the access of Russian tech companies to the use of western technologies for military purposes.3 “Russia not only continues to violate the sovereignty of Ukraine with its unprovoked aggression but also has escalated its attacks striking civilians and population centers,” said Secretary of the Treasury Janet L. Yellen in a statement. “We will continue to target Putin’s war machine with sanctions from every angle, until this senseless war of choice is over.”3
Meanwhile in Europe, the EU on Wednesday announced the potential implementation of a new, comprehensive plan aimed at continuing its crusade against so-called “sanctions-busting” efforts across their borders. Representatives for the EU stated that since March, enforcement of the Russian embargo has been weak and uneven across its various jurisdictions. Their solution thus far has been to increase the penalties for sanctions evasion to be on par with other cross-border offenses typically considered far more significant such as human trafficking, money laundering, arms smuggling, and terrorism. “We are targeting both those that benefit from violating [European] Union restrictive measures, but also those that facilitate it,” EU Justice Commissioner Didier Reynders told reporters in Brussels on Wednesday. “This will mean that the oligarch and their associated lawyers [and] bankers will be within the scope of the offense.”1 Thus far each of the EU’s 27 member states – with the exception of Slovakia and Estonia – have criminalized sanctions evasion efforts, though the penalties for such activities vary across national borders. As part of the EU’s sanctions-busting crackdown, limiting sanctions evasion will now be viewed as a major priority for regulators and law enforcement agencies across Europe, with penalties to become standardized across “domestic” borders. It is also expected that seizing the proceeds of sanctions evasion practices will also stand far greater chances of success should the new plan come to fruition.
Continuing to crack down on Russia financially seems like the sensible thing to do with respect to ending the war with Ukraine. Most economists believe that Russia’s economy will eventually collapse if global sanctions continue. In the meantime however, grossly removing Russia from the international financial and trade equations has already taken a toll on many world powers. Food prices have skyrocketed, as both Russia and Ukraine are global breadbaskets. Combined they make up 29% of the global export market for food and agricultural goods. A hunger crisis for less developed countries, ones that cannot afford the higher prices, is a very real possibility. Sanctions are also causing lower corporate profits in the U.S. and Europe. Europe will be hit especially hard since they have more direct trade with Russia. U.S. Treasury Secretary Janet L. Yellen emphasized the importance of preventing unnecessary damage to the global economy. The goal is for “maximum” impact on Russia while trying to “minimize spillovers to ourselves.” She said this balance “is always the core of the conversations that we’ve had.” One thing is for certain, so long as both Russia and the west refuse to budge, the world economy will continue to suffer the consequences.2
- Couvée, Koos. “EU Launches Sanctions Busting Crackdown.” MoneyLaundering.com, 26 May 2022.
- “Transcript of Press Conference from Secretary of the Treasury Janet L. Yellen in Bonn, Germany.” U.S. Department of the Treasury, 18 May 2022.
- VOA News. “US Announces More Russian Sanctions.” VOA, 31 Mar. 2022.